South Africa’s National Health Insurance Sites Underfunded

CAPE TOWN, South Africa, Jul 6 2012 (IPS) - Experts say that underfunded pilot universal healthcare sites to be set up by South Africa as part of its proposed national health insurance may be doomed to fail as debate rages about how the move to more equitable healthcare will be funded.

In March, South Africa announced 10 districts across the country that will pilot universal healthcare under its proposed national health insurance (NHI).

Pilot sites have only been allocated an additional R11 million (or 1.3 million dollars) to implement the NHI, according to Di McIntyre, professor at the School of Public Health and Family Medicine at South Africa’s University of Cape Town.

“The NHI is actually about comprehensive reform of the healthcare system…you can’t do anything with R11 million,” said McIntyre, speaking at the South African National Health Assembly in Cape Town on Jul. 6.

“We have to apply pressure to the national treasury to actually start funding the rebuilding of the public health system.”

Researcher Daygen Eagan, with the South African pro-bono human rights law organisation, SECTION27, estimated that pilot sites could need at least several hundred million rands to roll out the necessary healthcare improvements as part of the pilot, including district-based interventions to reduce maternal and child mortality, and expanded school-based health service.

South Africa released a draft policy document on the NHI in August 2011, and is hoping universal healthcare will not only increase access but also improve health outcomes and value for money.

According to the World Health Organization (WHO), South Africa spends about 400 dollars per person on healthcare, roughly the same amount as Cuba but charts much poorer results for this investment than the island nation.

Maternal mortality in South Africa, for instance, is about seven times higher than that in Cuba, according to the WHO. Now, researchers say that not only are pilot sites underfunded but that they have serious concerns as to how the country will fund the NHI.

Who will foot the bill?

Government has proposed that the NHI be funded through a National Health Insurance Fund, a public entity outside of the Department of Health but accountable to government. This pool of money may be funded through increased health budget allocations from general tax, or though increased personal income tax or the value added tax (VAT) placed on most purchased goods, which many argue would allow the country to tap into its huge informal economy.

However, McIntyre warned that increasing VAT would shift the burden of funding the NHI to poorer households, while the middle class and wealthy have enjoyed successive cuts to personal income tax since the country ushered in democratic rule in 1994.

Associate researcher with the Alternative Information and Development Centre in Cape Town, Dick Forslund issued a similar warning regarding the possible introduction of a payroll tax. While taxes like these initially draw on private sector resources, employers quickly begin to factor these kinds of taxes into wage negotiations, shifting the to employees.

McIntyre argued that government’s draft policy document, or Green Paper, is deliberately ambiguous on the issue of NHI funding, largely because National Treasury – not the Department of Health – will ultimately decide how universal healthcare will be funded. She called on health activists to be strategic in advocacy around the NHI.

“Treasury is going to kill the NHI dead so (we) have to be strategic,” she told IPS. “At a minimum, we should be calling for no further tax reductions.”

Breaking the rules

Both McIntyre and Forslund argued that more could come from South Africa’s existing tax base.

“For most countries, 70 percent or more of healthcare costs comes from public funds,” McIntyre told IPS.

“In South Africa, about 40 percent of money spent on healthcare comes from public funds with contributions from private insurance companies representing as bit or bigger of a share and there’s still quite a bit that comes out of (patients’) pockets.”

Despite signing onto the 2001 Abuja Declaration, in which African governments pledged to commit 15 percent of national budget to health, South Africa currently dedicates about 12 percent of its national budget to health.

If South Africa is going to up the ante for health, Forslund said the country will have to abandon neo-liberal economic policies ushered in as part of the country’s negotiated settlement as part of its transition to democracy.

These policies dictate tax revenue should not exceed 25 percent of the country’s Gross Domestic Product (GDP), said Forslund, arguing that what he called the “25 percent rule” was a strategy by the former Apartheid government to ensure that the political revolution did not become an economic one.

But with increasing social welfare demands on the state, including commitments to free education and healthcare, South Africa will need to break its 25 percent rule.

“The 25 percent rule means a small state,” he said. “It’s a much more conservative percentage than even that applied in the United States.”

By 2025, the NHI’s cost will equate to about six percent of GDP, he estimated.

Finance Minister Pravin Gordon announced early this year that the National Treasury would release a discussion paper on NHI funding in April but has not yet done so.